Most of HDFC’s new branches are in non-metropolitan, under-banked regions, the result of a regulatory mandate that management has turned into a strategy to attract more current and savings accounts from smaller towns. About 62% of HDFC Bank’s branches are outside India’s nine biggest cities.

HDFC Bank reported strong fiscal 2011 first-quarter numbers, including a net profit of US$72 million and strong year-over-year loan growth of 41%. Credit grew by 16% on a quarterly basis, driven by corporate lending, and surpassed the industry average. Asset quality was solid, as gross nonperforming loans (NPL) dropped to 1.2% from 2.1% a year ago.

HDFC is well positioned in the current environment of rising rates and loan growth because of its strong deposit franchise. It’s one of the best-run financials in Asia, a conclusion borne out by its extremely strong, steady growth rates. And current management has a good track record. It’s a direct play on India’s domestic demand story. Buy HDFC Bank up to $158. (It closed at around $162 in New York Wednesday—Editor.)

Dr. Reddy's Laboratories’ (NYSE: RDY) quarterly results came in weaker than [Wall] Street expected, largely because of weak US sales. Most of its other markets (i.e., Europe and India) performed well.

The current quarter, though, has started off well, and management is confident of a better showing over the balance of 2010. Dr. Reddy’s will introduce between eight and ten new generic products before the end of the year, and three or four have less than three competitors right now.

These could be the first outputs from a strong pipeline that industry experts expect will drive growth over next two to four year. Dr. Reddy’s has also a strong home-grown pipeline based on its research and development in the areas of cancer, diabetes, cardiovascular, inflammation and bacterial infections.

Dr. Reddy’s is a solid play on fast-growing emerging markets’ pharmaceutical industry, [and] the company could eventually become an acquisition target. Buy Dr. Reddy's up to $35. (It closed below $30 in New York Wednesday—Editor.)